Friday, April 29, 2011

That he did is charged by "Hayek" in the freshly released "Keynes versus Hayek: Round 2" at http://www.youtube.com/watch?v=GTQnarzmTOc , put out by Russ Roberts and John Papola, with backing from the Mercatus Center at George Mason. Like its predecssor, it definitely sides with Hayek, but is also highly hilarious, with pretty much anybody able to enjoy Papola playing Bernanke handing out wads of cash to bankers, and some other goofy stuff, such as libertarian anarchist Ed Stringham eagerly interviewing "Keynes" after he is declared the winner in a boxing match after being knocked down by "Hayek."

However, I do find it disturbing that increasingly Austrians and some others have taken to charging Keynes with having supported "central planning," as indeed done in this video. Is this correct? I think that the answer is largely "no," with it certainly being that answer if one means by that command central planning of the Soviet type that Hayek criticized in his Road to Serfdom (which Keynes praised, btw, when it first came out).

I think the strongest evidence for Keynes supporting central planning comes from two sources, which I shall quote. The first comes from his 1920s essay, "The End of Laissez-Faire," which has been identified as the inspiration for the movement for indicative (non-command) planning that was seen after WW II in such countries as France, Japan, India, South Korea, and some other places, although not UK or US.

After noting that uncertainty can lead to inequality of wealth and the unemployment of labor, he states: "I believe that the cure for these things is partly to be sought in the deliberate control of the currency and of credit by a central institution, ans partly in the collection and dissemination on a great scale of data relating to the business situation, including the full publicity, by law if necessary, of all business facts which it is useful to know. These measures would involve Society in exercising directive intelligence through some appropriate organ of action over many of the inner intricacies of private business, yet it would leave private initiative and enterprise unhindered." (p. 318 from Essays in Persuasion)

One can argue that Keynes is offering a hopeless contradiction when calling for this "directive intelligence," probably the closest he came anywhere to command, with his simultaneous limit on that regarding leaving "private initiative and enterprise unhindered," this latter certainly not fitting with the full-blowin command socialist model at all.

Regarding the information gathering, well, of course that is now generally done in most higher income economies, and many have argued that this was the essence of the indicative planning operations carried out in many countries, when they worked at their best, as some claim was the case in France in the 1950s, when businesspeople needed some sort of external push to revive their animal spirits, to use Keynesian language, and that seeing projections of demands by others helped provide this.

The other passage that some have pointed to as possibly suggesting a central planner tendency by Keynes comes from the final chapter of the General Theory, p. 378:

"Furthermore, it seems unlikely that the influence of of banking policy on the rate of interest will be sufficient by itself to determine an optimum rate of investmenet. I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which publich authority will co-operate with private intiative. But beyond this no obvious case is made out for a system of State Socialism which would embrace most of the economic life of the community."

One can argue again here that Keynes is setting himself up for some sort of impossible contradiction, and Hayek may well have argued that such control of investment would lead to his road to serfdom slippery slope. However, it is clear from later passages that what Keynes had in mind was ultimately the control of the aggregate of investment rather than of its specific forms or details.

These almost certainly provide the strongest evidence for Keynes supposedly supporting there being a "central plan." But it looks at most, putting the two together, like one that involves lots of provision of information and data along with some sort of control of aggregate investment, while leaving most of the decisions up to "private initiative." This hardly constitutes a "central plan," and certainly not one of the sort that the actually existing Hayek criticized. The fictional one in the video should have spoken more carefully.

Thursday, April 28, 2011

Donald Trump has emerged in recent years as the nation's foremost China basher, going after the Asian superpower for undervaluing its currency and for taking American manufacturing and jobs ... Now, Trump has long complained about Chinese currency "manipulation" and has called for a large tariff on imports of products from China in order to bolster U.S. manufacturing. But he has also gone further, urging Americans to buy fewer products from China, claiming that Chinese goods are shoddy and maintaining that, in his own business dealings, he favors American manufacturing over Chinese manufacturing.

Trump claims he is running for the Republican nomination to be President. One would think candidates in that party would be singing the virtues of free trade as if it made everyone better off. But I would agree with Mr. Trump on the international macroeconomic issue that their undervalued currency does have at least a minor impact on U.S. aggregate demand. And no – everyone is not better off from free trade even if Chinese goods are high quality. But having just read Dani Rodrik’s The Globalization Paradox, let me suggest that Mr. Trump also read this excellent discussion so he might sharpen his questioning of the standard Republican talking points for free trade.

But I’ve left off Justin Elliot’s punch line:

So it's at least ironic -- and at most an example of gross hypocrisy -- that Trump's own line of men's wear, the Donald J. Trump Signature Collection, is manufactured in China.I discovered this after walking from Salon's offices to the large Macy's in midtown Manhattan, where an entire section is devoted to the Donald J. Trump Signature Collection of suits and ties. This particular corner of the store is decorated with an oversize portrait of Trump; the line promises to provide "the pinnacle of style and sophistication" and "the necessities to be boardroom ready all of the time."

The Census Bureau reports that we purchased almost $365 billion in goods from China last year of which over $59 billion was related to apparel and footwear. So Mr. Trump is not alone in sourcing apparel from China. And I’d never call his clothing crap even he does.

Monday, April 25, 2011

The Saudi oil minister has announced a cut in Saudi oil production, claiming that there is "too much oil on the world markets," although recent reports suggest that US inventories are plunging, http://www.commodityonline.com/futures-trading/technical/Crude-oil-surges-on-US-inventory-data-23374.html , and longer term data on OECD and global inventories falling also, http://www.eia.doe.gov/steo/#Global_Crude_Oil_And_Liquid_Fuels .

Jim Hamilton at Econbrowser argues that Saudi Arabia may be running into production limits, noting particularly that it has never gotten back to 2005 levels of production, despite much higher prices more recently, http://www.econbrowser.com/archives/2011/04/saudi_oil_produ_4.html . On Crossroads Arabia, John Burgess reports at least two more theories of what is going on, beyond the production problems story and the obviously false claim that there is "too much" oil on the market, http://xrdarabia.org/2011/04/19/saudis-too-much-oil-on-the-market .

One of these involves internal Saudi politics, that the royal family has promised large amounts of spending in the near term to avoid a serious internal upheaval, and higher oil prices now help achieve that. I note that if this is what is going on it is the first time ever that the Saudis have not viewed the danger of declining long term demand due to much higher prices as more important than short term monetary gains, although maybe they are spooked by all the uprisings, and also if they are beginning to run low they may be taking a shorter time horizon, not to mention that younger and less patient members of the royal family may becoming more influential.

The final one, which Burgess views as paranoid, is that the royal family wants to at least display unhappiness with Obama's responses to the Arab Spring uprising, if not actually wanting to bring him down, although it is clear that if oil prices soar high enough to bring a return to global recession, that is the most likely way to bring about a failure of Obama to be reelected in 2012. In any case, the royal family has been openly displeased at the US supporting the rebels in Egypt (eventually), and are even more upset at mild US criticism of Saudi intervention in Bahrain, which the Saudis view as a possible inspiration for their own Shi'a to rise up. While the Shi'a are only around 12% of the Saudi Arabian population, they are located in the oil-producing Eastern Province and have long held senior positions in ARAMCO, dating back to when it was owned by US oil majors that hired them when they were being discriminated against by the majority Sunnis of Saudi Arabia.

In any case, this is the first time ever that I have seen any officials from Saudi Arabia making statements about world oil markets that are clearly not in line with the widely reported facts. Something is up, and I suspect it is some combination of all of the above.

Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising. Just 10 years ago, the U.S. economy was three times the size of China’s.

He could have mentioned that China’s population is over 1.3 billion while ours is approximately 0.3 billion. The CIA World Factbook noted that in 2010 China’s per capita income was only $7400 per year (ranking #126) whereas ours was $47,000 per year (ranking #10). One would hope that China’s growth would be such that its per capita income would surely converge to that of richer nations.

Thursday, April 21, 2011

Unbeknownst to me, my computer ended up somewhere in England, just before I have to leave town to address a delegation of Chinese visitors.

Up till now, I have had great luck with my computer. When I had a problem, I could send it back overnight, have it repaired the next day and have it come back on the following day. This time I only needed to repair a latch on the computer. I sent the computer back on Monday morning. I followed its movement to Lexington, Kentucky, where it got stuck. I was advised not to worry he was about to move again to nearby Memphis, where it was to be repaired.

UPS finally agreed to do a search for my computer. Later, they discovered that it was sitting in England. My computer then flew back to Lexington, Kentucky, not far from Memphis. My problem was that now on my problem was that now it had to pass through customs, where, UPS told me that it could take as much as a couple weeks to clear.

When I called Lenovo requesting a loaner, I got escalated up a couple levels to where I was told that the agent could do nothing more but to send a memo to somebody who was otherwise unreachable, and who would contact me sometime next week.

Wednesday, April 20, 2011

Robert Pear reports on a controversy surrounding the President’s proposal to increase the power of the Independent Payment Advisory Board:

Mr. Obama wants to expand the power of the 15-member panel, which was created by the new health care law, to rein in Medicare costs ... Under the law, spending cuts recommended by the presidentially appointed panel would take effect automatically unless Congress voted to block or change them. In general, federal courts could not review actions to carry out the board’s recommendations. The impact of the board’s decisions could be magnified because private insurers often use Medicare rates as a guide or a benchmark in paying doctors, hospitals and other providers. Last week, in his speech on deficit reduction, Mr. Obama said he wanted to beef up the board’s cost-cutting powers in unspecified ways should the growth of Medicare spending exceed certain goals. Supporters say the board will be able to make tough decisions because it will be largely insulated from legislative politics. Lawmakers do not agree. Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, called it “a rationing board” and said Congress should not “delegate Medicare decision-making to 15 people appointed by the president.” He said Mr. Obama’s proposal would allow the board to “impose more price controls and more limitations on providers, which will end up cutting services to seniors.”

Arguably the most important thing we can do to limit the growth in health care costs is learning to say no; we cannot afford a system in which Medicare in particular will pay for anything, especially when that’s combined with an industry structure that gives providers a strong financial incentive to engage in excessive care ... Mainly the attack is coming from Republicans, who want to dismantle Medicare, not save it — their proposal is that instead of having Medicare make choices based on expert advice, we should give seniors inadequate vouchers and let insurance company executives make those choices instead.

In other words, Congressman Ryan has an alternative rationing system – the free market. If you have little income and virtually no assistance from the Federal government, the price rationing system would basically tell you that you are not entitled to any health care services. Something tells me this is exactly the kind of society Congressman Ryan seeks. But would the rest of us agree with him if he were just honest enough to say so?

2011 – April 20th. Japanese Government to introduce legal sanctions against those entering the 20 kilometre evacuation zone. 2011 – April 20th. Japan nuclear agency finally admits fuel has melted in reactors 1, 2 & 3 2011 – April 19th. Radiation at No. 2 spent fuel pool millions of times above normal & thousands of times higher than troubled No. 4 pool 2011 – April 19th. Chernobyl still leaking radiation. The current concrete “shield now has cracks, raising fears that 95% of the original nuclear material remaining inside the reactor could escape. Radiation levels directly over the sarcophagus are too high for the [new steel] arch to be built over it” 2011 – April 18th. Reports that hot radioactive fuel is being bulldozed into the ground. 2011 – April 18th. Hamaoka nuclear power plant must shut down. The reactors sit right above the spot where a massive Tokai region earthquake is predicted to strike. 2011 – April 18th. “"What is most serious is that even a month after the accident, we see no prospects of getting radioactive leakages under control," North Korean media reports. 2011 – April 19th. Clouds of radioactive steam rising from Fukushima reactors 1,3 and 4 at 6am. 2011 – April 18th. The Surrey Nuclear Power Plant in Virginia Forced to Shut Two of its Reactors after Tornado. 2011 – April 19th. A pair of thin robots on treads sent to explore buildings inside Japan's crippled nuclear reactor came back Monday with disheartening news: Radiation levels are far too high for repair crews to go inside. 2011 – April 18th. US Congressman Markey alleges that the head of the NRC told everyone not to write down risks they find from an earthquake greater than 6.0 (the Indian Point nuclear plant was only built to survive a 6.0 earthquake) 792011 – April 16th. Japan asks Brazil to ease food import rules (radiation-contaminated food). Brazil is considering the request. 2011 – April 16th. EU Raises Level Of Japan Nuclear Radiation Allowed On Ships, Cargo By 300%. Has already raised the amount of allowable radiation in food 20 fold. 16th April 2011: Japan Nuclear Radiation In San Francisco Milk Exceeds Infant Dose In Less Than 3 Gallons ….US FDA tolerates a much higher level of radiation contamination of food than does the US EPA. “FDA’s limit for Cesium-137 in a single liter of milk is 47 times higher than EPA’s annual maximum for human exposure…. There have already been allegations that EPA plans to relax radiation standards. In the wake of this conflict of agencies, expect someone to try to relax the MCL for radionuclides.” 2011 – April 17th. Breaking news on NHK at 7pm ET: Smoke/steam rising from ALL 4 reactor units — Workers evacuated 2011 – April 16th. Radiation in groundwater at the Number 2 reactor has increased 17-fold in a week 2011 – April 16th. “2 Days ago the waterlevel in no6 went down to zero (core barely covered) and the temp went up. A few hours later that data disappeared…. The waterlevel in all 3 (1, 2 and 3) reactors is much too low; the cores are "partially" exposed, meaning the upper half of the rods have melted down and the rubble is at the bottom: http://atmc.jp/plant/water/” 2011 – April 15th. Running for our lives. “so far the winds have blown most of the danger out to sea and onto the northern American continent. If the winds turn and blow to the south for any length of time it could mean curtains for Tokyo…. Life goes on as before and if you want evidence for that just look at your newspaper, Yahoo news summaries or your television to see. But sorry, that is not the truth—not true at all as a tragedy on a civilization-size scale silently falls down on us in the form of nuclear mists of fine very dangerous particles.” “Part of the world ended a month ago in terms of the total destruction of parts of northern Japan and it is true of energy production and industrial capacity, which are collapsing in Japan and around the world like dominoes….” When I saw the videos of explosions on the atomic power station in Japan I knew immediately it was a great catastrophe, and that information is being withheld on an unimaginable scale.” 2011 – April 15th. Dr Christopher Busby estimates that about 400,000 people within 200 kilometres of Fukushima will get cancer from this accident. 2011 – April 15th. Nuclear fuel has melted in three reactors at Japan's Fukushima Daiichi nuclear power plant and fallen to the lower sections of their container vessels, raising the specter of overheated material compromising a container and causing a massive radiation release, the Atomic Energy Society of Japan said in a report released on Friday. What Really Happened Webmaster's Commentary THE FULL ARTICLE: “Fuel in the No. 1 and No. 2 reactors has made contact with air, while the No. 3 reactor's rods have remained underwater, the group said…. Tokyo Electric Power indicated it could drop sandbags filled with zeolite into the nearby ocean as soon as Friday to help curb the spread of radioactive contaminants… Workers earlier this week transferred roughly 660 tons of radiation-tainted water out of an underground passage, but fluid flooding the area reached its original depth by Friday morning, …Contaminated water has hindered efforts to restore cooling mechanisms needed to help prevent additional radioactive material from escaping the site… A nuclear waste treatment area intended to receive the water was still undergoing inspection for possible weak points in pipelines.” 2011 – April 15th. Nuclear firm says it has no blueprint to resolve crisis. Sydney Morning Herald seems to be trying to paint a rosier picture. 2011 – April 14th. Edano forced to retract PM saying Fukushima permanently uninhabitable. Fukushima milk being sold to Japanese. 2011 – April 14th. Japan considering relocating Government out of Tokyo 2011 – April 13th. Radiation from Japan shows up in the Southern Hemisphere (Australia, Fiji, Malaysia, Papua New Guinea). “To date, more than 35 radionuclide stations that are part of the International Monitoring System (IMS) have provided information on the spread of radioactive particles and noble gases from the Fukushima accident.” [A history of the global dispersal of radiation from the Japan nuclear emergency. 12th March – 3rd April 2011] 2011 – April 13th. First time radioactive cesium found in spinach, arugala and kale in the San Francisco Bay area. 2011 – April 12th. Japanese computer models for March 14th – 16th showed very heavy emissions of radioactive iodine and cesium. This month old assessment resulted in an upgrade of the nuclear disaster to Level 7 on 12th April 2011. Seiji Shiroya, a commissioner of Japan’s Nuclear Safety Commission said that the government delayed issuing data on the extent of the radiation releases. 2011 – April 12th. Elevated levels of radiation found in Ontario 2011 – April 12th. “It’s been a month since the 9.0 Earthquake, tsunami, and the first of a series of explosions at the Daiichi reactors. Since that time, Japan has received 980 earthquakes and aftershocks: a number so staggering that it is almost incomprehensible. Numerous explosions have occurred as well, and every day it seems the Japanese nuclear and government official reveal a little more about the true nature of the on-going tragedy at Fukushima.” 2011 – April 12th. "The troubled nuclear plant… is facing a wide array of fresh threats that could persist indefinitely, and that in some cases are expected to increase as a result of the very measures being taken to keep the plant stable,” according to a confidential NRC assessment. 2011 – April 12th. Radioactive Seaweed Detected In Puget Sound 2011 – April 12th. Secret weapons program inside Fukushima nuclear power plant? 2011 – April 11th. Strongest radioactive cloud covers Vietnam and dispersed on April 9th and 10th. 2011 – April 11th. Reporting has ceased on the dry well radiation readings of reactor number one. Have the nuclear fuel rods breached their containment core? “Japan now appears to have an abundance of radioactive sea salt that's unfortunately caked on top of the spent fuel rods and actually preventing much more water from reaching those rods. In a sense, spraying salt water on spent nuclear fuel rods is sort of like spraying them with a slow-acting insulation. It's only a matter of time, it seems, before that insulation make it impossible for water to keep the rods below meltdown temperatures.” 2011 – April 11th. Fukushima radiation taints US milk supplies at levels 300% higher than EPA maximums (figures from 2 weeks ago) + What’s wrong with the ‘science’ being used by the EPA. 2011 – April 11th. Meanwhile, a French Research Body On Radioactivity (CRIIRAD ) has broken stride with the corporate controlled media/experts and released a stern warning: “The risks associated with iodine-131 contamination in Europe are no longer “negligible.” Pregnant women and infants are advised against drinking fresh milk and eating vegetables with large leaves. 2011 – April 11th. Breaking News: New Quake Hits Japan, Fire At Fukushima Nuclear Reactor #4 Follows 2011 – April 11th. Extremely high levels of radiation in Japan. University researchers challenge official data. 2011 – April 11th. Russia to send back radioactive cars from Japan 2011 – April 11th. Yukio Edano: “"There are some places where cumulative levels of radiation are increasing depending on climate and geographical conditions, even outside of the 20-kilometre radius circle,". Japan added to the 20 kilometre evacuation zone … on Monday, as a powerful aftershock rattled the nation a month after its biggest recorded earthquake wrought devastation. The move to restricts pockets (only) beyond the current 20-kilometre evacuation area.” + The high priests of this kind of world tell us not to worry as they raise the limits of what is considered “safe” as they did in Japan—the water is now “safe” to drink in Tokyo because they moved the goal posts and raised the limits of what is “safe.” + “, the Japanese authorities have found that the areas beyond 20 km radius could be exposed to over 20mSv during the course of the next one year, approximately until next March…” 13950 millisieverts (50,000 microsieverts) is the safety standard for evacuation. It assumes emissions are temporary. “We are discussing how best to issue evacuation orders based on data and standards for accumulative radiation.”

Tuesday, April 19, 2011

That's my solution to the impending crisis over raising the legal US debt ceiling that threatens to shut down the US government, throwing us into many difficulties, and possibly crashing global financial markets if the US Treasury defaults on debt, thereby possibly throwing us back into a deep global recession. It is fear of political paralysis over raising the debt ceiling that lies behind the S&P's announcement yesterday of a downgrade to "negative" of prospects for US debt ratings, even though that remains AAA, which has in turn triggered Republicans like Eric Cantor to double down on demanding stronger budget cuts (really do in Planned Paranthood???) as the price for allowing another round of raising the debt ceiling.

As near as I can tell, I am the first person to publicly call for abolishing the debt ceiling, but there are very good reasons for doing so. The top is that the US is the only country in the world that I could find after considerable searching that even has one. Lots of googling only turned up a 2009 move in Germany to limit debt by its states, or Lander, although not on its federal government. A study by the Congressional Research Service, updated in 2008, made estimates of "debt ceilings" for many countries, but these were based on estimates of those countries' abilities to handle the interest payments of their debts, and the paper explicitly distinguished these artificially estimated debt ceilings from the "US legal debt ceiling" http://fpc.state.gov/documents.organization/105193.pdf . This study covered pretty much all of the high income OECD economies. Maybe Gambia or some other totally obscure country has a debt ceiling like the US does, but so far I have been unable to find a single one, much less any that have ever had one.

So where did it come from? The first such debt ceiling was imposed by Congress in 1917 at the time of US entry into WW I, when they passed the Second Liberty Bond Act, which allowed the US Treasury to issue long term bonds to fund the war effort. That initial debt ceiling involved several, each tied to different kinds and maturities of the US debt instruments. In 1939 these were unified into a single overall debt ceiling, which has been our system ever since. With the massive borrowing during WW II, the ceiling was raised by huge amounts each year. In more recent years, until now, the increases have usually been pro forma, with a total of 69 such increases since 1962.

So, this is something that people completely take for granted in the US, but for which there has never really been any good reason to have and now is clearly a major source of potential damage and trouble, with nothing good served at all by continuing to keep it. The irony is that it is especially ridiculous in a system of divided executive and legislative power such as we have, although that is probably why it was put in in the first place, to keep a war-fighting executive in line. In parliamentary democracies, if there is a profound dispute over budgets, there is a vote of no confidence, the government falls, there is an election, and the new one gets to deal with the mess. In ours, there is no fall of government if there is a breakdown between the branches as we seem to be heading towards, but we may get a politically caused financial collapse for which there is absolutely no good reason whatsoever, a weird gift from Mr. Madison's separation of powers.

So, I say, let us get rid of this dangerous monstrosity, the sooner the better. Abolish the US debt ceiling, and now!

Monday, April 18, 2011

Arthur Laffer is always good for a laugh. Sensitive to the heavy burden borne by readers of the Wall Street Journal, he bemoans the fact that the rich must employ so many people to find or develop tax loopholes. His remedy is to allow the rich to avoid taxes on capital income altogether with the flat tax.

Saturday, April 16, 2011

Meteor Blades at http://www.dailykos.com reports that Senators Graham, Paul, and Lee are proposing to put in a phased increase in the Social Security retirement age to 70 and to also limit the benefits paid to higher income people. First of all, I agree with Dean Baker and Bruce Webb, both of whom continue to do yeoman labor pointing out the many flaws in the arguments by many commentators about social security, that there is no serious financing problem with social security.

That said, I agree with Blades that this is a pernicious proposal. Raising the retirement age will hurt minority and blue collar workers. It is also not clear that we will continue to see increases in life expectancy, with poor white women particularly showing declining life expectancy in recent stats. Yes, cutting benefits to higher income types would be progressive, but it would also undercut them being willing to support the system. If somewhere down the road (not now), a fix is needed, raising the income cap on fica would be preferable as a progressive solution.

I also note that these proposals resemble those put out by Bowles and Simpson, who co-chaired the Cat Food Commission, and which some commentators think was wonderful, although the commission never formally put anything out as a whole, due to opposition to any tax increases by the likes of Paul Ryan. Ironically, Ryan has left social security alone in his bizarre budget proposal, just passed by the House without a single Dem supporting it. He is too busy going after medicare and medicaid, while proposing massive tax cuts for the rich that mean that his budget would run even higher deficits over the next decade than the status quo. What a joke, given all the serious commentators claiming he was "serious."

Thursday, April 14, 2011

John Ketch was the famous hangman, long-dead at the time, but John Trenchard and Thomas Gordon, the authors of the Cato's Letters published this call for the punishment of the banksters who perpetrated the disastrous South Sea Bubble. Sadly, the bankers went unpunished, beginning a long tradition.

Justice is not dead in the United States. Barry Bonds is convicted of his high crime. Our country is protected from Bradley Manning. And besides, Martha Stewart served time. The real culprits go free. Instead, the people will pay the price, while financial profits soar.

Saturday, April 9, 2011

I met with the students on my second day at the University, along with my outstanding translator, who was there for me that every session, sometimes translating me into Spanish, and sometimes including my hosts into English for me. As the letter I posted yesterday suggested, they were all familiar with books of mine. They asked questions that showed a political awareness that would have been unlikely in a US, setting. Part of the interest in talking with me, was a desire to know how to respond to a transformation of the country that is underway. In addition to the impending free trade agreement with the United States and the arrangement for three military bases, the government is planning a massive reform, a word that should make any right-minded person tremble.

Presently, the country is fairly generous with students, apparently far more than United States. All this is going to cease because the program was funded with World Bank money, which now must be repaid. In addition, universities will be privatized and turned into trade schools for the extractive industries, upon which the new economic plan rests. Colombia has already been under a heavily neoliberal program. The new move smacks of a combination of absurdity and violence.

After meeting with the students, I did an interview with a magazine published by the University. My first lecture was entitled "the Crisis in Capitalism from a US Perspective." Each of the commentators based presentation on one of my books, together with their critique of my talk, as well as material of their own interest. German Umana [pardon the absence of the Spanish characters here.] Was the first commentator. I was very impressed by the depth of his critique, delivered with a vigor that seemed common among the presenters here. The professor told the audience that his daughter reprimanded him for not participating in the massive demonstration that day.

I did not know it at the time, but Blanche was there at the demonstration, taking pictures of the Army tank, but not of the helicopters at the demonstration. She was told that the show of military force was necessary to protect the demonstrators in case that the FARC would unleash violence there.

My afternoon lecture was called "The Social and Environmental Consequences of Neoliberalism." The commentator, Prof. Irma Banquero Haberlin, mostly concentrated on the environmental toll of the petrochemical industry in Colombia. Her presentation was very informative.

The next day, my first lecture was, "The Exclusion of Labor in Economic Theory." The commentator, Prof. Luis Armando Banco did an excellent job of commenting with the usual Colombian enthusiasm. He correctly used commentary to address a blind spot in my work: the condition of immigrants in the United States.

The final talk was "The Larger Theoretical Problems with Economic Theory." The commentator was Isidro Hernandez. His presentation was less political, but more on a high academic level, which I appreciated very much.

I would've appreciated the conference much more if I had not been plagued by food poisoning, which I got from eating two bites of an airplane salad. Blanche's was much worse.

Because my schedule, I saw nothing of Columbia, except the airport, the hotel, the University, and the road back to the hotel. The speakers and the students, however, offered a great deal of information. The most informative talk came from Eduardo Sarmiento Palacio [I spelled his name wrong yesterday], trained at the University of Minnesota in highly technical economics, and formerly director of national planning until criticism of the government marginalized him.

Correction: Some of the students told me that my report of the number of students in the economics program was about 140, not 340.

With 14,000 missing votes from the City of Brookfield in pro-Prosser Waukesha County to the west of Milwaukee appearing late, Prosser now leads by several thousand, a pretty strong lead, if still a strong comeback by Kloppenburg from her 55-25% loss in the primary. Kloppenburg is asking for inspection of the results, and the county official in charge has strong GOP links and was accused of improprieties in a similar case in 2006 that switched the outcome of an election, but more likely than not, my recent post was wrong, even if I caveated that a recount could overturn the result (oh, and Hawthorne, I am at rosserjb@jmu.edu).

In any case, even before this apparent switch in outcomes, I wish to address the nasty remarks by Gov. Walker from before this switch. Whereas Kloppenburg said her support was due to people wanting an independent judiciary, Walker used the occasion to slam the city of Madison as being out of touch with the rest of the state, despite the large number of counties that went for Kloppenburg, and clearly the state is deeply split and polarized and will once again be a toss-up close race in the next presidential election. There are two traditions there, with neither being able to claim some exclusivity or definitive edge in support.

One of them dates from the founding of the Republican Party in Ripon, Wisconsin in 1854, with many German refugees from the failed revolutions of 1848 participating, with them being strongly anti-slavery and reflecting the principles that would appear in the later Progressive movement, initiated by former Republican President, Theodore Roosevelt when he ran as a third candidate in 1912, coming in ahead of the incumbent Taft (who pathetically won only Utah), although Wilson won the election.

As it was, Wisconsin followed this movement probably more than any other state, with its Robert M. ("Fighting Bob") LaFollette, a governor and senator (whose distant cousin serves even now as Wisconsin Secretary of State, Douglas LaFollette), becoming a main national leader of the movement and party and its presidential candidate in at least one election. His bust is in the state Capitol, and he is widely regarded as the state's greatest political figure in its history. It was he and his movement who were largely responsible for Wisconsin initiating many social programs later adopted at the national level, such as workmens' compensation, and collective bargaining for public sector workers, the latter now apparently to be ended. In any case, Robert M. LaFollette, and his whole family, were and are from Madison. It is the home and fountainhead of that tradition, which Walker mocks.

The other tradition is from the other branch of the state Republican Party, the Joseph P. McCarthy branch. That Walker is truly of that branch is seen in the demands by some of his allies to examine the emails of UW Professor William Cronon, who has criticized him and some of those around him. This matter has been blogged about here before, but it perfectly symbolizes exactly what tradition Walker is in and whose footsteps he is following in. These two traditions are clearly closely balanced in the state.

Thursday, April 7, 2011

For those not following it, Wisconsin Assistant Attorney General JoAnne Kloppenburg eked out a 204 vote victory over David Prosser in an election for the Wisconsin State Supreme Court. Even though this thin margin might get overturned in a recount, it is great news for those who like me have seen Wisconsin as Ground Zero in the battle for worker and union rights. There are several reasons.

The most dramatic is the enormous turnaround involved here. Prosser is a longterm politician in the state who was once House Speaker in the Assembly (with the GOP in charge) and is the incumbent, while Kloppenburg is nearly unknown and never ran for office before. In the primary some months ago, Prosser was 30% ahead of her, although he had failed to win a majority. So, she came from way behind, with only a few weeks ago many saying she had no chance. Clearly this comeback reflected a huge surge of changed opinion.

Also, this changes the balance on the court, which may end up ruling on the various anti-union and worker laws Governor Scott Walker has been pushing through. Prosser was the most conservative member of a court with a clear 4-3 conservative majority, now to be switched, although it must be noted that officially the supreme court elections are non-partisan. But Prosser's Republican affiliations were well known, and he apparently served as a mentor of the new governor.

I cannot also resist noting that Walker has responded to this by blaming it all on the city of Madison, essentially claiming it does not deserve to be a part of the state. As it is, in the Madison mayoral election, previous two term Mayor, Paul Soglin, handily defeated incumbent Dave Czislewicz (sp?). The latter is reasonably progressive, but Soglin (who was a recently ex-student radical when first elected mayor in 1973) ran strongly on the matter of the recent demos in the city, and so support for him reflects this strong sentiment that has the gov so whinily annoyed, hah!

Wednesday, April 6, 2011

Our flight from San Francisco went to Houston, where we had to wait a considerable time because of delays. I happened to speak to several people were going to Bogotá for major petroleum industry conference regarding. They regarded Columbia as an important new frontier for petrochemicals.

We arrived in Bogotá where our hosts took us to an elaborate five-star hotel, where they put us up in an apartment rather than an ordinary hotel room. The hotel is a gigantic five-story complex, which probably covers two city blocks with a very large courtyard in the center, complete with a church. Blanche was told that foreign service officers used to stay here very frequently, but not so much anymore. Not surprising, quite a few of the people here are wearing apparel that show an affiliation with petrochemical industries.

We went to the University the next day to meet with the president and vice president, then went to a small auditorium, where the faculty, who already some of my books, posed questions to me. It was a very pleasant experience, except that in the course of our discussions, I learned that the country has no new petroleum deposits. Instead, the petroleum industry will use more intensive methods of extracting the remaining hydrocarbons.

I asked a group, if they knew anything about fracking. To my horror, they knew nothing about it. I showed them the trailer for gasland and the cover page for the New York Times series, Drilling Down. They were shocked at the trailer.

The economics department is quite large, with 442 students. Eduardo Samiento, an American trained economist, who was once quite influential in the country, but was somewhat marginalized after his criticism of the government became too irritating. Even so, he seems to have been able to create his own department with his own heterodox faculty, something almost unthinkable in the United States.

This afternoon, I will give my first address. I was told that people will be coming from other cities to share the address and the University expects that this will be the first time that the auditorium is expected to be filled. I will find out later how true this is, but for the moment I will enjoy the thought.

Finally, I will mention how much I enjoy the people here. The staff in the café in hotel struck up a conversation with Blanche, who told them that I was interested in environmental questions. One of them has invited me to give a talk Saturday evening to the local Greenpeace chapter. I just told him this morning about fracking, and he too was unaware. I mention him because he and another worker who of gone out of their way to procure food that would suit our the diet. In the supermarket, people routinely struck up conversations, especially with Blanche.

Regarding security, when our host took us to a shopping mall to get Sim cards for phones, the guards had to open the trunk and use dogs to check for explosives. Similarly, when I went there myself with my computer in my large fanny pack, I was checked with some electronic device.

At the same time, everybody who talks to us is curious about our own fears about security. They tell us that the elaborate security procedures are meant to put people at ease, rather than as necessary precaution. Even so, my host told us that we should be cautious about using a cell phone in public, because people snatch them whenever they see a target. At the little stand, where someone cracked our cell phone to make the sim card works, a young man came with a handful of cell phones to have some sort of work done on them.

I gave a talk last week at a local college called "What is living in the thought of Adam Smith and dead as a doornail in modern economics." One focus of the talk was this passage from Book V of WN:

V.1.178

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expence of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.

Notice the rationale for government intervention here: this has nothing to do with correcting a market failure, nothing to do with efficiency; the argument is that the great body of the people produced by a commercial society with a refined division of labor would otherwise be, as he goes on to say, "deformed in an essential part of their humanity." And this is most emphatically not education as "human capital." Tellingly, when I ask my history of economic thought students to write about Smith on the Division of labor, after we have looked at the first three chapters and the passage from which the quote above is lifted, and I ask were they any qualifications Smith made to his enthusiasm for the DOL in the opening chapters, students will cite this passage and say that here Smith is saying that The DOL may in fact make people stupid and so less productive after all!!! Obviously they have completely misread this passage. Why? They have already been so indoctrinated by their study of economics that they cannot think about what Smith thought was crucial - the way in which economic institutions shape character and preferences, for ill (as in this passage) or for good (there is lots in Smith of course about the way markets promote the virtue of prudence, eg). The further implication that one cannot evaluate economic institutions without evaluating the preference they promote or hinder is again simply unthinkable for someone who has received the standard education in economics, where the idea of evaluating preferences is a veritable contradiction in terms - since the efficient satisfaction of exogenous preferences is the sole evaluative criterion countenanced, and anyone who thinks otherwise is committing the grave sin of paternalism.

Ryan is proposing huge (and largely unspecified) spending cuts; but he’s also proposing very large tax cuts, mainly, of course, for those with high incomes. And as you can see, a large part — roughly half — of the spending cuts are going, not to deficit reduction, but to finance those tax cuts. Actually, it’s even worse, since the revenue figure in the Ryan plan is simply assumed, and is clearly too high given what he’s actually proposing on taxes; so either the fall in revenue will be even larger than shown here, or there will be unspecified tax hikes on the middle class.

In other words, Holtz-Eakin’s argument rests on his belief that the Ryan plan actually does cut spending by more than it cuts taxes – even if a lot of the spending cuts are unspecified and the tax revenue projections are based on unspecified offsetting tax increases.

Oh but the National Review has a counterargument of sorts from Lawrence Kudlow:

Obsessing over the debt is not by itself a policy. Advancing the economy and setting the stage for more job creation is a policy. Mr. Ryan kept an important dose of Ronald Reagan in both the spirit and reality of his plan. Limited government, lower tax rates, and deregulation (of energy) will all promote the path to prosperity.

Yes – the same old Laugher Curve nonsense that one can cut taxes by more than one cuts government spending and still see faster long-term growth. After all, reducing national savings does not necessarily reduce investment in Kudlow’s supply-side world! After all – this worked wonders 30 years ago – right?

Our flight from San Francisco went to Houston, where we had to wait a considerable time because of delays. I happened to speak to several people were going to Bogotá for major petroleum industry conference regarding. They regarded Columbia as an important new frontier for petrochemicals.

We arrived in Bogotá where our hosts took us to an elaborate five-star hotel, where they put us up in an apartment rather than an ordinary hotel room. The hotel is a gigantic five-story complex, which probably covers two city blocks with a very large courtyard in the center, complete with a church. Blanche was told that foreign service officers used to stay here very frequently, but not so much anymore. Not surprising, quite a few of the people here are wearing apparel that show an affiliation with petrochemical industries.

We went to the University the next day to meet with the president and vice president, then went to a small auditorium, where the faculty, who already some of my books, posed questions to me. It was a very pleasant experience, except that in the course of our discussions, I learned that the country has no new petroleum deposits. Instead, the petroleum industry will use more intensive methods of extracting the remaining hydrocarbons.

I asked a group, if they knew anything about fracking. To my horror, they knew nothing about it. I showed them the trailer for gasland and the cover page for the New York Times series, Drilling Down. They were shocked at the trailer.

The economics department is quite large, with 442 students. Eduardo Samiento, an American trained economist, who was once quite influential in the country, but was somewhat marginalized after his criticism of the government became too irritating. Even so, he seems to have been able to create his own department with his own heterodox faculty, something almost unthinkable in the United States.

This afternoon, I will give my first address. I was told that people will be coming from other cities to share the address and the University expects that this will be the first time that the auditorium is expected to be filled. I will find out later how true this is, but for the moment I will enjoy the thought.

Finally, I will mention how much I enjoy the people here. The staff in the café in hotel struck up a conversation with Blanche, who told them that I was interested in environmental questions. One of them has invited me to give a talk Saturday evening to the local Greenpeace chapter. I just told him this morning about fracking, and he too was unaware. I mention him because he and another worker who of gone out of their way to procure food that would suit our the diet. In the supermarket, people routinely struck up conversations, especially with Blanche.

Regarding security, when our host took us to a shopping mall to get Sim cards for phones, the guards had to open the trunk and use dogs to check for explosives. Similarly, when I went there myself with my computer in my large fanny pack, I was checked with some electronic device.

At the same time, everybody who talks to us is curious about our own fears about security. They tell us that the elaborate security procedures are meant to put people at ease, rather than as necessary precaution. Even so, my host told us that we should be cautious about using a cell phone in public, because people snatch them whenever they see a target. At the little stand, where someone cracked our cell phone to make the sim card works, a young man came with a handful of cell phones to have some sort of work done on them.

Tuesday, April 5, 2011

Sciences are distinctive in many ways, but they all have in common the drive to minimize Type I error. This, you will recall, is the risk of accepting a hypothesis when it is actually false, as against rejecting it when it is actually true—the Type II variety. Sciences are progressive, advancing over time, because they have systematic procedures for expunging falsehoods. Other fields of human achievement have much to offer, but they lack this particular trait. Biology in 2011 is “better” than biology fifty years ago in a way that music or politics isn’t.

If you are still wondering whether economics should be considered a science, think about all the articles you’ve read that claim to be testing theories, and where the key language is “is consistent with”. “The starred coefficients in Table 9 are consistent with the properties of equation 18", “The greater incidence of such episodes in countries in Panel A is consistent with the predictions in our model”, etc.

The long form of “is consistent with” is “we should be more willing to accept this theory because it could be explaining the data”. The short form of this long form is “rejecting this theory risks Type II error”. Remarkably, most economists think this approach is what makes economics scientific.

If you take Type I error seriously, you have to ask, does the evidence preclude any other explanation? Am I at risk of accepting a false explanation because there is another which is actually correct? In practical terms, this means two things: taking all plausible explanations into consideration and not just the one you want to support, and searching aggressively for all the elements in your data that might contradict your pet theory. This second admonition includes examining subsamples whenever feasible, for instance.

Because economics, as it is practiced, is more concerned about Type II than Type I error, it propagates and defends a vast array of dubious propositions, and there is little methodological resistance.

Monday, April 4, 2011

Mark Thoma wasn’t exactly cheering the latest employment report precisely because an employment to population ratio equal to 58.5% is still extremely weak. Kim Peterson notes one firm is about to hire 50,000 more workers:

The hiring binge is one result of the extraordinary business run McDonald's has engineered over the past few years. When the economy tanked, more people turned to the Golden Arches to dine on a budget.

We are eating at McDonald’s and not better restaurants because we are poorer. And these jobs are not exactly coming with very high wages.

Sunday, April 3, 2011

Brad DeLong asks, What was Karl Marx's principal contribution? and concludes that it can all be summed up in about ten paragraphs on the philosophy of history.

I will leave to real Marxists (which I am not) to post a strong defense of the guy, but I have to say I'm surprised that someone who claims to take history seriously, as Brad does, would devalue Marx's contribution to that field. Given the evidentiary record available to him at the time, Marx was an extraordinary student of British history during the previous three centuries. Wouldn't it be fair to say that the largest part of modern British historiography is in some sense in dialog with Marx?

Marx's main failing was to generalize from this single case an entire theory of political, social and economic development. The further Marx (or his disciples) strayed from England and the time period of the emergence of capitalism, the worse they have fared. This should not obscure the accomplishment, however.

Saturday, April 2, 2011

"'At least 500,000 people - perhaps more - have already died out of the 2 million people who were officially classed as victims of Chernobyl in Ukraine,' said Nikolai Omelyanets, deputy head of the National Commission for Radiation Protection in Ukraine. ... 'We have found that infant mortality increased 20% to 30% because of chronic exposure to radiation after the accident. All this information has been ignored by the IAEA and WHO. We sent it to them in March last year and again in June. They've not said why they haven't accepted it.'"[1]

"Just how does the United Nations IAEA manage to ignore half a million to a million dead Eurasians?…. The "threshold dose" concept is used as the determinant of who is counted and who is not. That's how the IAEA/WHO manipulates the data on Chernobyl and in-effect lies to the world on the horrors of radiation poisoning. Multiple official sources confirm that there is no safe dose of radiation, at all.” [2]

“Libya has dislodged from the headlines a nuclear catastrophe in Japan, on top of a seismic one, that’s one of the epic dramas of the past half-century and what’s doubly weird is that the actual fighting in Libya is a series of tiny skirmishes. The muscle-bound adjectives and nouns used to describe the military engagements – if they even deserve that word – in press reports remind me of a Chihuahua trying to mount a Newfoundland. Ambition far outstrips reality, which is in this case is a nervous rabble motley insurgents – maybe 1,500 or so at most, posing for television crews and then fleeing back down the road to the next village (“strategic stronghold”) at the first whiff of trouble….”[3]

"There was a rumor that George Monbiot had handcuffed himself to the Libyan nuclear research center to show solidarity with Qaddafi’s alleged commitment to research into nuclear power as an alternative to fossil fuels, but the word from Monbiot HQ was that that the silliest man in Great Britain is planning a symbolic flyover of Chernobyl as a monument to the safety of nuclear power, before inaugurating a “nuke camp” next to Daiichi 2 at Fukushima. Everything is out of proportion." [4]

“World markets are simply unpreapared for the third-largest economy to suddenly and violently downshift. The persisting crisis at Fukushima simply worsens the picture.” [5]

“Mr. Golay said he doubted that it would be possible to evacuate a 50-mile radius in and around an urban area in the U.S.. "We're certainly not prepared for it," he said…. About 20 million people live within 50 miles of Indian Point [home of two nuclear reactors] which is 35 miles from Midtown Manhattan.” [6]

U.S. emergency-response plans call for only evacuating residents within a 10-mile radius of a nuclear disaster. However, last week, the U.S. Nuclear Regulatory Commission recommended that Americans within 50 miles of Japan's Fukushima Daiichi plant evacuate. [This was later followed by a mass evacuation of hundreds of thousands of American defense personnel from the entire Japanese nation.] [7]

“The end never comes, this just goes on forever” [8]

"Today, tens of thousands of tons of irradiated fuel sits in spent fuel pools across America. At many sites, there is nearly ten times as much irradiated fuel in the spent fuel pools as in the reactor cores. The spent fuel pools are not cooled by an array of highly reliable emergency cooling systems capable of being powered from the grid, diesel generators, or batteries. Instead, the pools are cooled by one regular system sometimes backed up by an alternate makeup system. “The spent fuel pools are not housed within robust concrete containment structures designed to protect the public from the radioactivity released from damaged irradiated fuel. Instead, the pools are often housed in buildings with sheet metal siding like that in a Sears storage shed. I have nothing against the quality or utility of Sears’ storage sheds, but they are not suitable for nuclear waste storage. “The irrefutable bottom line is that we have utterly failed to properly manage the risk from irradiated fuel stored at our nation’s nuclear power plants. We can and must do better." (The Union of Concerned Scientists.)[9]

31st March 2011: “..According to Business Week, "When plutonium decays, it emits what is known as an alpha particle, a relatively big particle that carries a lot of energy. When an alpha particle hits body tissue, it can damage the DNA of a cell and lead to a cancer-causing mutation." If plutonium leaches into groundwater or pristine aquifers, the threat to public health and the environment will be extreme.” [10]

29th March 2011: Radioactive caesium and iodine has been deposited in northern Japan far from the Fukushima Daiichi nuclear plant, at levels that were considered highly contaminated after Chernobyl. The readings were taken by the Japanese science ministry, MEXT, and reveal high levels of caesium-137 and iodine-131 outside the 30-kilometre evacuation zone, mostly to the north-north-west. Iodine-131, with a half-life of eight days, should disappear in a matter of weeks. The bigger worry concerns caesium-137, which has a half-life of 30 years and could pose a health threat for far longer. Just how serious that will be depends on where it lands, and whether remediation measures are possible."[11]

24th March 2011: "...The soil contamination is really high. Soil found 40 kilometers away.... the levels on the soil were very high—in fact, a thousand times iodine, 4,000 times the cesium standard. And we just got a report from the Kyoto Research Reactor Institute, Dr. Tetsuji Imanaka, that said that—he had to look a little bit more into the sampling of the Japanese government, but depending on how the sampling was done, this level of contamination in the soil could be twice the amount that was compulsory evacuation for Chernobyl.[12]

[2] JOE GIAMBRONE in his article: Atomic Moron - The UN Would Never Lie to George MonbiotPublished in the Weekend Edition, Counterpunch. April 1 - 3, 2011http://www.counterpunch.org/giambrone04012011.html

[8] Radiation Expert on CNN: “The end never comes, this just goes on forever” (VIDEO)

[9] Dave Lochbaum, Director of UCS’s Nuclear Safety Project, who testified on Wednesday before the Senate Energy and Water Development Appropriations Subcommittee.As quoted in:Fukushima Fallout Hits the US. March 31, 2011Radiation Found in Rainwater From California to MassachusettsBy MIKE WHITNEYhttp://www.counterpunch.org/whitney03312011.html

[10] Fukushima Fallout Hits the US. March 31, 2011Radiation Found in Rainwater From California to MassachusettsBy MIKE WHITNEYhttp://www.counterpunch.org/whitney03312011.html

[11] Caesium fallout from Fukushima rivals Chernobyl * 15:29 29 March 2011 by Debora MacKenzieFor similar stories, visit the The Nuclear Age Topic Guidehttp://www.newscientist.com/article/dn20305-caesium-fallout-from-fukushima-rivals-chernobyl.html[12] Aileen Mioko Smith, March 24 (thanks to Michael Collins "They said it wasn't like Chernobyl and they were wrong"As quoted in:The Doomsday Scenario - Is Fukushima About to Blow?By MIKE WHITNEY. March 28, 2011http://www.counterpunch.org/whitney03282011.html

Friday, April 1, 2011

With all the hubbub about the need to cut taxes, I haven't seen much attention to the subject of fees. Fees are an excellent way of gouging extra money from the public. Airlines, knowing that people shop by price, advertise low prices and then pile on the fees. Banks make enormous profits from fees. During a recent stay at the Hilton Hotel in New York, I discovered that the cost of printing out a boarding pass was several dollars and that the charge for Wi-Fi in the lobby was separate for the $15 daily charge for the Internet in our room.

In the public sector, government can generate revenue from taxes or from fees. For example, governments can make up for shortfalls in revenue, in part, by becoming more conscientious about getting tickets for driving or parking infractions. Visits to parks or museums become more expensive.

Privatization offers an indirect method for generating fees. The privatization of the public road saves the government money for maintenance, but the public then covers the cost, as well as profits for the operator, by charging fees. In addition, the public has to endure the inconvenience of stopping and waiting to pay their fees.

Fee-based government seems to be a far more fiscally regressive method than the traditional fee-based government. In addition, these do not seem to generate the same degree of public resistance.

I am leaving for Bogotá tomorrow. The Columbia School of Engineering is holding a three-day conference/seminar on my work. They are generously flying Blanche and myself, to spend a week there. I've never had an opportunity like this before.